Hi guys,
A another blog to you ppl, I hope this will give some information about the catchy words used by frauds in the industry. Did you guys ever asked your consultant to explain how this LC/BG works?
Worst part is many centers think that LC is Liquid Cash will be deposited in a bank for guarantee. Not a joke its true.
A standard, commercial letter of credit is a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking.
The LC can also be source of payment for a transaction, meaning that
redeeming the letter of credit will pay an exporter. Letters of credit
are used primarily in
international trade
transactions of significant value, for deals between a supplier in one
country and a customer in another. They are also used in the land
development process to ensure that approved public facilities (streets,
sidewalks, stormwater ponds, etc.) will be built. The parties to a
letter of credit are usually a
beneficiary who is to receive the money, the
issuing bank of whom the applicant is a client, and the
advising bank of whom the beneficiary is a client.
LC being an irrevocable undertaking of the issuing bank makes available the Proceeds, to the Beneficiary of the Credit provided,
stipulated documents strictly complying with the provisions of the LC,
UCP 600 and other international standard banking practices, are
presented to the issuing bank, then:
- i.if the Credit provides for sight payment – by payment at sight against compliant presentation
- ii.if the Credit provides for deferred payment – by payment on the maturity date(s) determinable in accordance with the
stipulations of the Credit; and of course undertaking to pay on due
date and confirming maturity date at the time of compliant presentation
- iii.a.if the Credit provides for acceptance by the Issuing Bank – by acceptance of Draft(s) drawn by the Beneficiary on the Issuing Bank and payment at maturity of such tenor draft, or
- iii.b. if the Credit provides for acceptance by another drawee bank – by acceptance and payment at maturity Draft(s)drawn by the
Beneficiary on the Issuing Bank in the event the drawee bank stipulated
in the Credit does not accept Draft(s) drawn on it,
or by payment of Draft(s) accepted but not paid by such drawee bank at maturity;
- iv. if the Credit provides for negotiation by another bank – by payment without recourse to drawers and/or bona fide holders,
Draft(s) drawn by the Beneficiary and/or document(s) presented under
the Credit, (and so negotiated by the nominated bank )
- Negotiation means the giving of value for Draft(s) and/or document(s) by the bank authorized to negotiate, viz the nominated
bank. Mere examination of the documents and forwarding the same to LC
issuing bank for reimbursement, without giving of value / agreed to
give, does not constitute a negotiation.
Almost all letters of credit are irrevocable, i.e., cannot be amended or cancelled without prior agreement of the beneficiary, the issuing
bank and the confirming bank, if any.Fraud Risks
- The payment will be obtained for nonexistent or worthless merchandise against presentation by the beneficiary of forged or
falsified documents.
- Credit itself may be forged.
However you can not be the beneficiary, So your consultant can give a LC with different name to his organization and he can agrees to cancel any time.
They will give you a perfect reasons, why you can not be a beneficiary, cos some other centers also associated to do the process, or you will not eligible to get the LC.
So, Sure you will get a Bank Guarantee. They will say pay our consultancy charges once you received the BG. Let see how it works,
For what purposes will a company issue a Bank Guarantee?
To secure your obligations under a Contract entered into with another party. For example:
- When you enter into a contract to purchase a property, a Bank Guarantee is issued to the vendor (the Beneficiary) equal to the amount
of the deposit required. It effectively takes the place of a cash
deposit between the time of exchange and settlement of the property.
- When you enter into a lease to occupy premises, a Bank Guarantee is issued to the landlord or estate agent at the start of a lease as
security for damage or unpaid rent.
- When you enter into a building contract, your builder may require security to be lodged for reasons such as cost overruns or failure to
meet a progress payment. A Bank Guarantee can be issued for this
purpose.
What fees and charges are involved in getting a Bank Guarantee? A one-off upfront application fee of $400 applies.
They will ask you to pay this, what to do without understanding how this works, we do pay.
What fees and charges are involved in cancelling a Bank Guarantee?
Generally none. ( so funny no??? )
One center in our town started negotiating with a consultant in Mumbai for a UK Form filling process, They got the BG form a financial institution in Dubai. They verified that with their Bank and paid 8 lakhs to start the process.
Nothing happened, after tired of contacting them, when they came back to check the BG, it was canceled very next they paid.
Still I dint understood the whole concept of this LC/BG, I am just sharing my knowledge with you guys. So dont think if your client provided this BG, he is genuine.
All the best
Do the best
Be the best
Regards,
Karthik
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